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Government of India and the Reserve Bank of India (RBI) have taken several steps and initiated frameworks for encouraging digital payments.The roll outs of Digital wallets have proved beneficial for fulfilling the government’s plan of creating a digital economy. As of now, wallets of different payment service providers are not allowed to directly transfer money to each other like money can’t be transferred from PhonePe Wallet to Paytm. The prepaid payment instruments (PPI) that provide prepaid payment services in the form of digital wallets, like Paytm, GPay, PhonePe and Bharatpe, MobiKwik etc., will have to enable interoperability of wallets by March 2022.
Interoperability is a concept where one payment system provider is connected technically with another payment service provider’s platform to use the facilities of other payment systems. Interoperability allows Prepaid Payment Instruments (PPIs) issuers and payment system providers to clear and settle payment transactions across platforms without participating in multiple systems.
In 2021, the RBI released a Master Directions on Prepaid Payment Instruments (PPIs), which discusses the issuance, operation and types of Prepaid Payment Instruments and has consolidated Interoperability guidelines.Under this master direction, Prepaid Payment Instruments (PPIs) have been further classified into two categories small PPIs and full KYC[1] PPIs. In this blog, we will discuss the guidelines issued by the Reserve Bank of India for prepaid wallet interoperability.
The RBI guidelines mandated the Payment Wallet operator to have full interoperability by March 2022. Some major requirements for achieving Prepaid Wallet Interoperability through card networks and UPI are discussed mentioned below:
Successful interoperability between PPIs such as wallets and cards will allow users to transfer money from one wallet to another. Some popular payment wallets are Paytm, GPay, PhonePe, Freecharge, Mobikwik etc. With the interoperability of PPIs, consumers will be eligible to make payments from a wallet to any merchant accepting digital payments. This concept of interoperability brings wallets on par with cards and changes the consumer’s behaviour.
Only wallets that comply with KYC requirements will be able to interoperate, and the RBI has established a tight set of guidelines to protect digital wallets and stop transactions using fraudulent wallets. The RBI Master Directions appear to be a progressive step intended to help non-banking organisations acting as PPI Issuers and increase digital transactions. Prepaid Wallet Interoperability enables wallet users to transfer money to any other wallet over UPI and permits PPI Issuers to create new UPI handles. This will further assist non-banks in tapping into a customer base that does not currently possess payment wallets.
Read our Article: Interoperability of PPIs: RBI mandates pre-paid cards, wallets to be made interoperable
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